By Suzanne McGee, Akash Sriram and Anirban Sen
PROVIDENCE, Rhode Island, Aug 14 (Reuters) - Institutional investors pulled back slightly from key stock market segments such as semiconductors, AI infrastructure and megacap technology companies during the second quarter, with few big bets in either direction, U.S. Securities and Exchange Commission filings show.
A Reuters analysis of quarterly 13F filings from 6,371 pension funds, hedge funds, wealth managers and other institutional investors reveals
a narrow gap between the number of investors increasing their positions and those reducing them, but in many cases the gap swung slightly negative.
Nearly 44% of filers reviewed trimmed their holdings of the Magnificent Seven group of megacap tech firms such as Microsoft and Meta Platforms, while 42% initiated or expanded their holdings of this group. These giant tech stocks collectively have helped power the stock market higher over the recent bull market. The remainder did not disclose any change to their stakes.
The filings are for the quarter through June 30. The analysis is based on filings as of early Friday afternoon, according to the SEC website.
Investors do not disclose the reasoning for their position changes. But some market participants said the data might say more about the extent to which many institutions have already built up positions in these market segments than about their fundamental outlook for these entities — and might help to explain some recent market momentum shifts.
"When buys and sells are that closely matched, to us it signals the absence of consensus," said Shaia Hosseinzadeh, founder of OnyxPoint Global Management, a hedge fund. "Nobody disputes the quantum of (AI) spending that is happening." But he added there is disagreement about which companies ultimately will profit, which creates uncertainty.
For many funds that have held big stakes in these businesses for some time, risk factors also come into play.
"What you might be seeing is that some of these large firms might be long as much as they want to be or should be, given their risk parameters or investment policies," said Steve Sosnick, market strategist at Interactive Brokers.
"That also would explain why some companies that have reported good earnings have still seen their stocks sell off afterwards," he added. "The big holders who might normally have been buyers on good news just couldn't add more to their positions."
Institutional investors still displayed a bullish tilt toward semiconductor names as of the end of the second quarter, the 13F data showed. Of the funds that had filed with the SEC by early afternoon, 48% were net buyers and only 34.5% were net sellers.
A similarly narrow gap is evident with respect to a group of 20 major software companies, including Adobe and Datadog, with 28.2% of institutional investors revealing they were net sellers while 26.3% were net buyers.
TIGER PRUNES STAKES IN MAGNIFICENT SEVEN
At least one widely followed hedge fund, Tiger Global Management, disclosed that it cut its holdings in several Magnificent Seven companies, including Microsoft, Nvidia and Meta, and reduced its exposure to Alphabet by 45.4% to 5.8 million shares. The fund also reduced its holdings in Taiwan Semiconductor, as did SoftBank Group, although Tiger boosted its holdings of Intel during the quarter.
That may have cost some hedge funds dearly in July, when an unwinding of technology-oriented trades put a big dent in returns. Crowded bets on technology stocks meant it was particularly difficult for hedge funds and other speculators to capture their previous profits when trying to exit their trades, JPMorgan said in a note published earlier this month and seen by Reuters.
Investors displayed a bias for building their stakes in AI-themed stocks during the second quarter, with 36% of all institutions that have so far filed their 13F documents disclosing they were net buyers of companies such as CoreWeave, Arista Networks and Broadcom.
During the second quarter, AI-related stocks ranging from memory chips to data centers "moved from (being) a fundamental growth story into a highly leveraged momentum trade," said Bruno Schneller, managing partner at multi-family office Erlen Capital Management, which invests in hedge funds.
The July selloff in many of these names, Schneller added, "was less a rejection of the long-term AI thesis and more a classic crowded-trade unwind amplified by leverage and inadequate risk controls."
Despite the spike in crude oil prices during the second quarter, institutional investors in aggregate showed little affection for the sector, with 40.3% reporting they were net sellers of a group of a dozen major energy firms, while only 28% were net buyers.
OnyxPoint, which invests in AI-adjacent companies such as metals and mining companies and energy businesses, increased its exposure to some energy plays in the second quarter.
The hedge fund established new positions in BP and Devon Energy as well as Fervo Energy, a geothermal energy provider. OnyxPoint also initiated a stake in Keel Infrastructure, a data center company.
Overall, institutional investors displayed a wait-and-see attitude toward data centers, with net buyers and sellers almost precisely balanced, at 24.3% each of all those that had filed their reports.
(Reporting by Suzanne McGee in Providence, Akash Sriram in Bengaluru and Anirban Sen in New York; editing by Michelle Price, Colin Barr, Rod Nickel)
